For his second "Executive Decision" segment of Mad Money Friday night, Jim Cramer spoke with Andy Callahan, president and CEO of Hostess Brands (TWNK) , the snack foods maker that reported a beat-and-raise quarter. Shares trade for 16 times earnings.
Callahan said the snacking trend was strong before the pandemic and now with people spending more time at home that trend is bigger than ever. He said consumers love and trust the Hostess family of brands that include the iconic Twinkies.
Hostess has been making a lot of progress since its bankruptcy, Callahan noted. The company has streamlined operations, cut costs and de-leveraged its balance sheet. It has also authorized a stock buyback program which gives them even more flexibility to reward shareholders.
Let's check out the charts and indicators.
In this daily bar chart of TWNK, below, we can see that prices made a new high for the move up on Friday. TWNK has recovered most of its first quarter decline. Prices are trading above the rising 50-day moving average line and the bottoming 200-day moving average line. Trading volume was heavy in March as prices made a low and have remained pretty active since then.
The On-Balance-Volume (OBV) line has been climbing since late March and tells us that buyers of TWNK have been more aggressive.
The Moving Average Convergence Divergence (MACD) is above the zero line and slowly turning upwards to a buy signal.
In this weekly bar chart of TWNK, below, we can see a large double bottom in 2018 and 2020. Prices need to rise above $15 to complete the pattern and give us a proper breakout. TWNK is trading above the bottoming 40-week moving average line.
The weekly OBV declined to a March 2020 low but has been improving since then.
The MACD oscillator has just crossed above the zero line for an outright buy signal.
In this daily Point and Figure chart of TWNK, below, we can see the recent new high for the move up and a potential price target in the $15-$16 area.
Bottom line strategy: Tough decision - should we recommend the stock or the products? or both? Aggressive traders with a sweet tooth could go long TWNK at current levels risking a close below $12.50. The $15-$16 area is our price objective for now.
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